Page 72 - ASEAN-EU Dialogue 2018: Regional and Inter-Regional Economic Cooperation: Identifying Priorities for ASEAN and the EU

independence. Asians generally do not expect their governments to provide for their sustenance
and instead accept the need to look after themselves (The Economist, 2018b). In a study by
Furuoka (2017b), it was found that labour market dynamics in Asia can be classified into two
basic patterns. The first pattern highlights countries which have unemployment rates with a
weak reversion tendency, whereas the second shows those that have unemployment rates with
a strong reversion tendency. These patterns suggest that some Asian countries face the issue of
unemployment hysteresis while others do not.

As demonstrated in Figure 12.2, the first category is represented by Japan and Singapore.
Unemployment rates in these countries tend to increase during economic crisis but do not revert
to normal levels or mean values after the end of the crisis. For example, like other Asian
countries, Japan and Singapore went through the Asian economic crisis in the late 1990s. Thus,
there was a noticeable upward climb in their unemployment rates in the early 2000s. However,
when the economy recovered in the late 2000s, unemployment rates in these countries did not
immediately decrease to pre-crisis levels. A plausible explanation for this is the effect of aging
population on unemployment rate (Serban, 2012). Since Japan and Singapore are two of Asia’s
fastest aging societies, unemployment among the older generation is an issue they have been
struggling with for the past few decades. Thus, unemployment hysteresis is more likely to
happen in these countries than others in the region.

12

10

8

6

4

2

0
1980 1985 1990 1995 2000 2005 2010 2015

JAPAN KOREA
PHILIPPINES SINGAPORE

Source: World Bank (2018)

Figure 12.2: Unemployment rates in Japan, South Korea, the Philippines and Singapore
(1980-2015)

By contrast, South Korea and the Philippines seem to belong to the second group of countries
which have fewer problems with unemployment hysteresis. Their unemployment rates have a
stronger mean reversion tendency. South Korea’s unemployment rate increased during the
Asian Economic Crisis in the late 1990s, but almost immediately reverted to a lower level after
the crisis ended. In the case of the Philippines, its unemployment rates are relatively higher.

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